INDEPENDENCE, Mo. — As cities reopen and businesses emerge from stay-at-home orders, local governments are figuring out how to manage budgets that are expected to face shortfalls due to the coronavirus pandemic.
The city of Independence is one of many cities facing such decisions.
“Year after year, our retail sales tax revenue from the brick and mortar stores within the city of Independence was either flat or maybe it was declining or it was very nominal growth,” City Manager Zach Walker said. “What the pandemic brought about was a rapid dissension of that already declining revenue source.”
The city, according to Walker, faces a 21 percent decline in retail sales taxes, which is its primary funding source. Revenue from its use tax, however, has increased. The latest use-tax figures released Monday show a $957,033 receipt from April.
Use tax is similar to a sales tax that targets primarily online sales, levying the tax based on where the product is used rather than where it’s sold.
The yearly use-tax forecast for the city of $2,871,000. It’s one reason the city is encouraging Gov. Mike Parson to call a special session, so lawmakers can pass a bill that would allow the state to collect sales taxes from out-of-state online retailers.
“Most cities estimate at least a three-fold increase in what they would see in their sales tax revenue collection from this,” Walker said, “and that would begin to close that loophole and replenish that sales tax revenue previously approved by voters but then lost because of the migration to online.”
Pleasant Valley Mayor David Slater, also president of Missouri Mayors United, sent a letter to Parson asking for a special session.
“They have to have a session on the pandemic because their budget is going to be so messed up,” Slater said. “It’s going to be underfunded and they are going to have to make some tough cuts.”
41 Action News reached out to Parson’s office but did not hear back at time of publication.
In January, the governor’s budget chief estimated an online sales tax would increase state revenue by $60 million to $80 million per year. Missouri and Florida are the only two states that have refused to implement such a tax.
“If you buy something from Wayfair, you don’t pay sales tax,” Slater said. “If you buy something from China, there’s no sales tax. So what we’re trying to do is not only help our local economy, but help our brick and mortar businesses because they have to have a leveled playing field.”
